There's really very little a doubt left about it. In order to achieve financial independence and freedom, the average American is going to have to take some degree of risk. With life spans, and thus retirement years, getting longer and Social Security not even coming close to providing enough for most people to live on (it was never really meant to), it's necessary to realize that the time to provide for one's later years is right now.

But what do you do? Where do you start? Well, you can begin by looking at how long you have before you reach retirement and how much money you're going to need when you get there. If you can first determine your projected monthly retirement expenses along with income, then you'll easily be able to see any shortfall. A shortfall is the difference between the amounts that you'll realistically need to have and what you anticipate that you actually will have. You'll also need to determine how much you can begin investing with.

Let's say that you figure out, for example, that you're going to have a shortfall of about $300,000 and you have 20 years left before reach retirement age. You have $50,000 from the sale of a piece of property available to invest. In this situation, most people would plunge into one of the "hot" investments advertised in a money magazine, or seek the help of a traditional financial advisor, stockbroker, or financial planner. But if you take one of these approaches, you could still have a problem. This is because most investment sales organizations operate within the framework of pretax returns and relative performance.

Most investors use the model of total return based on historical performance as their primary, if not only, financial gauge. But total return is nothing more than a visual display of the past; it's not an indicator of the future. And historical performance only reveals a small amount of the information that you actually need to know.

For instance, a stockbroker may show you a dollar goal projection, illustrating the magic of compounding using the historical rate of return of 10 percent (and all the while selling that 10 percent figure as conservative). At 10 percent, your $50,000 would grow to $336,000 in 20 years and $872,000 in 30 years, which sounds impressive. But something important has been overlooked, and it's the fact that total return drastically overstates the future purchasing power that you'll have because it ignores such things as taxes, fees, and inflation.

And these oversights can make a world of difference. With typical taxes of 2 ½ percent along with broker's fees of 2 ½ percent, your 10 percent return assumption is now reduced to 5 percent. Doing the math, your $50,000 after 20 years would not be worth $336,000, but only $132,000. Subtract 3 percent for inflation, and real dollar projections would drop to a meager $74,000. Without taking all factors into consideration you could literally be hundreds of thousands of dollars off your mark and not have the time needed to make it up.

Your objective, therefore, should be to focus on the dollar amount that you'll need and on the total after-tax return; after-tax meaning after fees, after expenses, after anything and everything that stands in the way of you reaching your goal. Endeavor to control everything that's in your power to control. Make sure that you understand what combinations of investments will give you the highest probability of making up any shortfalls while reducing your costs as much as possible. It's up to you to operate your investment program with full awareness of all tax and fee consequences.